Stock Analysis

Mobiis Co., Ltd. (KOSDAQ:250060) Shares May Have Slumped 33% But Getting In Cheap Is Still Unlikely

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Mobiis Co., Ltd. (KOSDAQ:250060) shares have retraced a considerable 33% in the last month, reversing a fair amount of their solid recent performance. The good news is that in the last year, the stock has shone bright like a diamond, gaining 118%.

In spite of the heavy fall in price, when almost half of the companies in Korea's Electronic industry have price-to-sales ratios (or "P/S") below 0.9x, you may still consider Mobiis as a stock not worth researching with its 6.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Mobiis

KOSDAQ:A250060 Price to Sales Ratio vs Industry March 17th 2024

How Mobiis Has Been Performing

The revenue growth achieved at Mobiis over the last year would be more than acceptable for most companies. One possibility is that the P/S ratio is high because investors think this respectable revenue growth will be enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Although there are no analyst estimates available for Mobiis, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For Mobiis?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Mobiis' to be considered reasonable.

Retrospectively, the last year delivered a decent 8.1% gain to the company's revenues. The latest three year period has also seen an excellent 47% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 13% shows it's about the same on an annualised basis.

In light of this, it's curious that Mobiis' P/S sits above the majority of other companies. It seems most investors are ignoring the fairly average recent growth rates and are willing to pay up for exposure to the stock. Although, additional gains will be difficult to achieve as a continuation of recent revenue trends would weigh down the share price eventually.

The Final Word

Mobiis' shares may have suffered, but its P/S remains high. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Mobiis revealed its three-year revenue trends aren't impacting its high P/S as much as we would have predicted, given they look similar to current industry expectations. When we see average revenue with industry-like growth combined with a high P/S, we suspect the share price is at risk of declining, bringing the P/S back in line with the industry too. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Before you take the next step, you should know about the 4 warning signs for Mobiis (2 make us uncomfortable!) that we have uncovered.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

Valuation is complex, but we're helping make it simple.

Find out whether Mobiis is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.